Where bad information about bankruptcy comes from

The latest entry in my intermittent series on “where does this mis information about bankruptcy come from” concerns the effect of paying your credit cards before bankruptcy.  This, according to www.mybankruptcyguy.com, could lead to the denial of discharge.  Rubbish, pure unadulterated rubbish.

Here’s what I read on American Debt Relief about bankruptcy and credit cards:

Make the Right Decisions in Credit Card Bankruptcy

When you have decided to file for bankruptcy to discharge credit card debt, there are important actions that you can take to help your situation. The most important action that you can take is to stop using your credit cards…  Good, so far.

You should also stop paying off your credit cards if you decide to file for bankruptcy and do not show favoritism by paying off one debt, while leaving another. These actions could result in a denial of discharge, unwinding of your payments and could prevent the bankruptcy from going through.  Nonsense.

There is no prohibition in the Bankruptcy Code against paying one creditor over another.  None.  There is a provision that permits the trustee to recapture preferential payments from creditors who are paid disproportionately in the roll up to bankruptcy.

It is neither wrong to pay a preference nor wrong to accept a preference. The only person at risk in the transaction is the recipient of the payment who may have to give it back to the trustee to distribute according to the Bankruptcy Code priorities.

Further, California law expressly permits a debtor to prefer one creditor over another.

I’ve been known to growl at clients who come to initial consultations prepared to tell me what they’ve learned, elsewhere, about bankruptcy law.  I’m not always appreciative.<g>  But the more apparently authoritative sources I find for this tripe, the more I think I need to cut my clients some slack.